Technical vs Fundamental Analysis

Fundamental analysis asks about the business. Is ITC profitable? In 2025-26 its profit was ₹20,286.42 crore. Does it pay shareholders? It paid ₹14.50 a share for that year. Where does its profit come from? Mostly cigarettes. What is the business worth? That last answer is an estimate built on assumptions, not a number you can look up.

Technical analysis asks about the price and the trading. How has the price moved? From ₹309.65 on 21 April 2026 to ₹260.80 on 19 October. How active is trading? On 19 October, 1,15,28,925 ITC shares changed hands on NSE, and 53.18% of them were marked for delivery. Where did falls stop? Looking back, near ₹253.15, the low of 8 October.

The price is a fact you can check for a given time. A value estimate depends on a model and on judgment. A chart records trades, but not the reasons behind them. Keeping these limits in mind is more useful than arguing about which method is better.

A business can do well while its share price falls, as ITC's did in 2026. A share can also rise while the business struggles. Neither case proves one lens wrong. Start with your own question, then pick the evidence that can answer it. One question has no lens at all: what happens next.

Begin with one plain sentence: what does the company sell, and who pays for it? ITC reports five segments: cigarettes, other consumer goods (foods and personal care, which ITC calls FMCG-Others), agri-business, paperboards and packaging, and a small 'others'. Each has different customers and costs.

Then compare sales with profit. In 2025-26, ITC's segments sold ₹90,713.20 crore in total, and cigarettes were ₹37,099.65 crore of it: 40.9% (derived). But of the ₹25,138.86 crore of segment results, cigarettes earned ₹21,051.12 crore: 83.7% (derived). FMCG-Others sold ₹24,209.75 crore and earned ₹1,802.63 crore. The 'others' segment made a small loss of ₹8.06 crore.

So one business brings in most of ITC's profit. That is a fact from the filing. Whether that is a strength (a loyal, profitable product) or a risk (one product exposed to tax and regulation) is an interpretation, and you should test it against evidence. Analysts sometimes call a lasting advantage a moat; calling something a moat is a claim to check, not a finding.

Ask what could interrupt the business. For cigarettes, taxes are an obvious one, and chapter 12 shows a real case. The wider economy matters too: input costs, borrowing costs and consumer spending affect each segment differently. Trace each link to the company's actual sales and costs.

Governance is how the company is run and whose interests its decisions serve. Read about the board, related-party transactions, management pay and how shareholder money is used. Profit, competitive position and honest disclosure each add evidence; none of them alone finishes the analysis.

The statement of profit and loss (the income statement) covers a period. ITC's covers the year from 1 April 2025 to 31 March 2026. The balance sheet is a snapshot of one day, 31 March 2026: what the company owns, what it owes, and the shareholders' equity. The cash flow statement shows how cash came in and went out during the year.

Here are ITC's standalone figures for 2025-26, in ₹ crore, with 2024-25 in brackets. Gross revenue from sale of products and services: 80,867.49 (73,466.61). Revenue from operations: 81,640.11 (74,238.13). Total income: 84,927.29 (77,693.10). Profit before tax from continuing operations: 26,767.60 (26,530.26). Profit for the year: 20,286.42 (20,093.29 from continuing operations).

Read the notes as well as the totals. ITC's gross revenue includes excise duty, a tax on cigarettes, and the excise expense almost doubled to ₹9,656.33 crore from ₹4,912.55 crore. The filing itself says the 2025-26 figures are not strictly comparable with the year before, because cigarette taxes rose from 1 February 2026. So the 10.07% rise in gross revenue (derived) overstates the business's growth.

ITC also publishes consolidated figures, which include its subsidiaries. Consolidated gross revenue was ₹89,258.21 crore and profit attributable to ITC's owners was ₹20,689.47 crore. Standalone covers ITC Ltd alone; consolidated covers the group. Use one scope at a time, with the same period and the same units, and say which one you used.

Suppliers, staff, lenders and tax authorities are paid in cash, not in profit. So compare the two. In 2025-26, ITC's standalone profit was ₹20,286.42 crore. Its net cash from operating activities was ₹17,094.97 crore. That is 0.84 of profit arriving as operating cash (derived).

Why the gap? Profit is counted when sales are made, but cash moves on its own timetable. ITC's inventories grew by ₹3,157.86 crore during the year, which ties up cash in stock. The cash flow statement also shows ₹5,795.34 crore of income tax actually paid. Many smaller items add and subtract as well.

Then take off spending on long-lived assets such as factories and machines, called capital expenditure or capex. ITC spent ₹2,069.30 crore on property, plant and equipment and similar assets. Operating cash minus capex is ₹15,025.67 crore (derived). That simple figure is not a full free-cash-flow calculation, which needs more adjustments.

One year's gap between profit and cash can come from real investment, stock building or payment timing. It does not prove a problem on its own. Look at several years, look for unusual gains, and read the notes. These are standalone figures; we have not shown ITC's consolidated cash flow.

Earnings per share, or EPS, is profit for shareholders divided by the number of shares. ITC's standalone basic EPS for 2025-26 was ₹16.20. Its shares have a face value of ₹1, and at 31 March 2026 there were about 1,252.95 crore of them. EPS describes profit per share; it is not the dividend.

The price-to-earnings ratio, or P/E, divides the share price by EPS. This is where the two lenses meet: the price comes from the market, the EPS from the filing. On 19 October 2026, ₹260.80 ÷ ₹16.20 = 16.10 times (derived). Using consolidated EPS of ₹16.52 instead gives 15.79 times (derived). Always say which EPS you used.

Trailing P/E uses past earnings, as here. Forward P/E uses forecast earnings, which are assumptions. A ratio is true only on its date: the price changes every session and the EPS changes with each new filing. A low P/E can reflect real worries about the future; a high one can reflect demanding hopes. P/E means little when EPS is zero or negative.

Other ratios answer other questions. ITC's dividend of ₹14.50 divided by ₹260.80 is a trailing dividend yield of 5.56% (derived). Dividing ₹14.50 by EPS of ₹16.20 shows ITC paid out about 89.5% of its standalone earnings per share (derived). A net margin of profit to gross revenue is 25.09% (derived), but excise inside gross revenue distorts that figure. None of these numbers is a universal 'safe' level.

Discounted cash flow, or DCF, estimates what future cash is worth today. Money received later is worth less than money now, because you wait for it and it may not arrive. The rate used to shrink future money is called the discount rate, or required return.

Take a teaching assumption, not a forecast: suppose ITC's ₹14.50 dividend for 2025-26 were paid unchanged for the next five years. At a 10% discount rate, the first year's ₹14.50 is worth ₹14.50 ÷ 1.10 = ₹13.18 today (derived). All five payments together are worth about ₹54.97 today (derived), against ₹72.50 with no discounting.

The dividends stayed the same; only the discount rate changed the answer. Raise the rate and the total falls; lower it and the total rises. This shows how discounting works. It is not a value for ITC. A real valuation also needs forecasts over many years and an estimate for the years beyond them, often called terminal value.

A full valuation needs assumptions about sales, margins, taxes (which, as ITC's 2026 shows, can change suddenly), reinvestment and risk. Small changes in long-term assumptions can move the answer a lot. Compare several scenarios and explain your inputs. A precise-looking value is still an estimate, never a promised future price.

A chart lines up recorded prices over time. For each interval it shows four prices: open (the first trade), high and low (the extremes), and close. NSE's official daily close follows its own calculation rules rather than simply the last trade. A candle draws all four at once; the interval can be a day, a week or anything you choose.

Here is a real one. On 19 October 2026, ITC opened at ₹262.70, rose to a high of ₹263.90, fell to a low of ₹259.95 and closed at ₹260.80. The previous close, on 16 October, was ₹263.50. The close was below the open, so the day's candle is drawn as a down (red) candle. These numbers come from NSE's daily file, the bhavcopy.

Volume is the number of shares traded in the interval: 1,15,28,925 ITC shares on 19 October. It is not the number of investors. Every trade has a buyer and a seller, so volume alone cannot show that buyers outnumbered sellers. NSE also reports delivery: 53.18% of that day's shares were marked for delivery rather than closed out the same day.

20 October 2026 was an NSE holiday (Dussehra), so there is no candle for it. The next session, 21 October, opened at ₹261.00, reached ₹264.85, dipped to ₹260.15 and closed at ₹262.00: an up (green) candle. This module looks at price action: trends, ranges, levels, candles and volume. Those describe market behaviour. They do not show the company's quality or anyone's reasons for trading.

A trend is the general direction over a chosen window. ITC's month-end closes in 2026 were ₹314.90 (April), ₹286.90 (May), ₹286.95 (June), ₹281.00 (July), ₹255.50 (August) and ₹262.75 (September). Over those six months the direction was mostly down, with pauses. A range is when the price moves back and forth inside a band without clear direction.

Support is an area where earlier falls paused or turned back. Resistance is an area where earlier rises paused or turned back. Treat both as zones drawn from what already happened, not as exact prices with special powers.

Looking back at ITC, falls stopped near ₹253 to ₹256 three times: the close of ₹255.50 on 31 August, the low of ₹254.65 on 1 October, and the low of ₹253.15 on 8 October, after which the share closed at ₹266.00 the next day. At the top of the window, the highest close was ₹316.25 on 29 April. These are hindsight descriptions, not signals.

Where you start the window and how you draw a zone both change the reading. Mark your zones before you see what comes next, and write down what would prove you wrong. A support zone is not a floor and resistance is not a ceiling. The price can move through either at any time.

A breakout means the price moved beyond a level you defined beforehand, under a rule you stated. The rule matters: trading above a level during the day and closing above it are different events. Define the level, the interval and the condition before you look at what happened next.

A real case from ITC's chart, read in hindsight. In the 20 sessions up to 28 April 2026, the highest price was ₹311.10 (21 April). On 29 April, ITC closed at ₹316.25, up 3.88% from ₹304.45 (derived), above that level. About 3.12 crore shares traded, around 1.60 times the average of about 1.95 crore over the previous 20 sessions (derived).

Higher volume shows that more shares traded than usual. It does not show who bought or why, and it does not promise the move will continue. In ITC's case, the price reached ₹317.90 on 4 May and closed at ₹310.70 on 6 May. By 29 May it had closed at ₹286.90, 9.28% below the 29 April close (derived), back under the level it had crossed.

A retest is when the price comes back to a level it recently crossed. It may hold, fail, or never happen. Waiting for one changes your rule; it does not remove risk. Breakout analysis needs a stated condition for review and realistic assumptions about execution, not a rule to buy every move above a line.

Separate what you saw from what you expect. 'ITC's 2025-26 standalone EPS was ₹16.20' is a fact from a dated filing. 'ITC fell 9.71% on 1 January 2026' is a fact from NSE's daily file (the percentage is derived). 'ITC's P/E was 16.10 on 19 October 2026' is arithmetic on two facts. You can check all three.

'The ₹8 final dividend will be paid again next year' is an assumption. 'The ₹253 to ₹256 area will hold again' is an interpretation of a chart. 'The 1 January fall shows investors expected lower profits' is an interpretation of a price move. Writing these separately, instead of saying them all with the same certainty, makes your reasoning easier to check.

Some technical reasoning assumes that past price behaviour can help with future decisions. Market-efficiency research asks how fast and how fully prices take in public information. Saying prices reflect information does not mean the market knows everything, or that everyone agrees on value.

Fundamental research rests on assumptions too: that the filings are reliable and that the future will look something like the past. Neither approach escapes uncertainty by using different words. Ask what supports a claim, what else could explain it, and what new evidence would change your mind. If nothing could change it, it is a belief, not an analysis.

Take one end point, ITC's close of ₹260.80 on 19 October 2026, and three windows. Over one month, from ₹262.30 on 18 September, it is down 0.57% (derived): almost flat. Over six months, from ₹309.65 on 21 April, it is down 15.78%. Over one year, from ₹412.15 on 17 October 2025, it is down 36.72% (derived). Each statement is true; they cover different stretches of time.

The one-year view includes the share's high of ₹426.40 on 31 October 2025 and the sharp fall on 1 January 2026. The one-month view shows neither. Charts drawn at different sizes also use different price scales, so a move that fills one chart can look small on another. Check the scale before comparing.

A short trade and a multi-year holding need different questions. A trader may watch execution and day-to-day moves closely. An investor may spend more time on the durability of the business and its cash. These are tendencies, not fixed rules. Business news can hit a short trade, and a poor entry price still matters to a long-term owner.

Write down your time horizon before you commit money, along with what you will watch and when you will review it. Quietly turning a failed short trade into a 'long-term investment' avoids facing the original decision. If you deliberately change your goal, it needs fresh analysis and a new risk plan.

Accounts describe a finished period and arrive after it ends. Late on 31 December 2025, the Government notified higher excise duty on cigarettes, effective 1 February 2026. Any business case built only on ITC's earlier accounts could not have included that.

The price reacted first. On 1 January 2026, ITC fell from a previous close of ₹403.00 to ₹363.85, down 9.71% (derived), on 28,26,26,710 shares. WION reported it as ITC's sharpest one-day fall since 2020. Godfrey Phillips India, another cigarette maker, also fell that day. The higher taxes took effect on 1 February 2026.

The accounts caught up on 21 May 2026, when ITC's results showed excise duty of ₹9,656.33 crore against ₹4,912.55 crore the year before, up 96.6% (derived), and said the figures were not strictly comparable. Profit for the year still rose slightly. The business lens saw the effect clearly, but months after the chart did.

Valuations can also be wrong because the assumptions are wrong: growth too hopeful, tax or investment needs too low, the required return too low. Even a sound estimate does not say when, or whether, the market will agree. A margin of safety, a gap between price and estimated value, depends on the estimate itself. Fundamental investors can still set review conditions and position limits without a chart.

A chart cannot tell you whether customers paid, when a loan is due, or whether management used shareholders' money well. Rising prices do not prove good governance, and falling prices do not name the problem behind them. Three real ITC falls show the limit.

First, 1 January 2026: from ₹403.00 to ₹363.85. The chart shows a big down day; the cause, the excise news, came from outside the chart. Second, Sunday 1 February 2026, a special session NSE held for the Union Budget: ITC opened at ₹324.60, above the previous close of ₹322.15, then fell to close at ₹309.45, down 3.94% (derived). It was also the day the higher cigarette duty took effect. We found no sourced report tying the fall to either event, so we do not name a cause. The chart alone cannot supply it.

Third, 27 May 2026: from ₹301.65 to ₹291.95, a fall of ₹9.70 (derived). That was the ex-dividend and record date for the ₹8 final dividend, when the share starts trading without the right to that payment. The dividend explains ₹8 of the fall at most; the rest came from ordinary trading. Without the company's announcement, the chart would just show a fall.

Indicators are calculations from price or volume. Several indicators built from the same prices are not independent proof. Patterns and levels also look clearer after the outcome is known, and different people mark different lines on the same chart. Use clear definitions, test them on many cases including failures, and treat a memorable example as an illustration, not as proof.

For the business lens, start with the company's own documents and its exchange filings. ITC filed its 2025-26 results with NSE and BSE on 21 May 2026 at 15:20 India time (file ITC_21052026152029_Results.pdf on NSE), and posts them on its investor pages at itcportal.com. Annual reports, quarterly results, auditor reports and notes each serve a purpose. A screening website helps you find a company; check important figures in the original document.

Compare like with like. The same company has two EPS figures for 2025-26: ₹16.20 standalone and ₹16.52 consolidated. Check the period, currency, units, accounting basis and whether a figure was restated. Do not mix a quarterly profit with annual revenue and call it an annual margin.

For the price lens, use the exchange's own record. NSE publishes a daily file for every session, such as sec_bhavdata_full_19102026.csv for 19 October 2026, and historical price and volume data per security. The ITC daily series in this lesson comes from Yahoo Finance (ITC.NS) and matched NSE's files on every date we cross-checked. One session was missing from it: the special Sunday session of 1 February 2026, which we added from NSE's file. Without it, the next day's open looks like a gap that never happened.

For charts, check the exchange, the instrument, the interval, the time stamp and whether prices are adjusted for splits or other corporate actions. Mark holidays: there is no ITC candle for 20 October 2026. A quote on a screen may be delayed and is not always a price you can trade at. An accurate old document may still be out of date for today's decision, so check later announcements too.

Practice: open ITC's 2025-26 results on NSE or itcportal.com. Find the standalone and consolidated statements, the notes and the units (₹ crore). Find the excise note and the dividend details. This is practice in finding your way around a filing, not an opinion on ITC's value. Investor.gov's guide to the US 10-K report covers a US format; do not confuse it with Indian requirements.

One possible process starts with your decision and time horizon. Business research looks at financial strength and valuation assumptions. Price research describes how the share has traded. A risk review covers position size, how easily you can buy or sell, execution and when you will reassess.

Business events can be pinned onto the chart. ITC's results came on 21 May 2026, filed at 15:20, just before the market closed. The first full trading day after them, 22 May, ITC closed at ₹301.70, down 2.06% from ₹308.05 (derived). The final dividend's record date followed on 27 May, and ITC held its 115th AGM on 23 July. Pinning dates like these shows what the chart did around each event, without claiming it explains why.

The order can vary. A chart move can prompt you to read the filing; a filing can prompt you to look at the chart. Using both does not mean giving them equal weight, and adding a second lens does not make a process profitable.

When the lenses disagree, ask why. ITC's steady profit and falling price might reflect a long horizon, changed expectations about taxes, or something else entirely. Neither disagreement is an instruction to act. Waiting, making a smaller decision or not taking part at all can be reasonable when the uncertainty is larger than your process can handle.

A headline can mislead without being false. ITC's consolidated profit for its owners was ₹20,689.47 crore in 2025-26 against ₹34,746.63 crore the year before, about 40% lower. But the earlier year included a one-off gain from demerging ITC Hotels into a separate listed company. Comparing continuing operations, standalone profit rose from ₹20,093.29 crore to ₹20,286.42 crore, up 0.96% (derived).

The price lens has its own trap: anchoring on an old number. On 19 October 2026, ITC was 38.84% below its high of ₹426.40 from 31 October 2025 (derived). Distance from a past high is not a measure of value. It tells you where the price was, not where it should be.

Confirmation bias is looking only for evidence that agrees with you. A business researcher may skip an awkward note; a chart reader may keep redrawing a line until it fits. Cherry-picking good companies, dates or patterns hides the ones that failed, and hindsight makes every outcome look obvious. Write down your evidence and your rule before you see the result.

Another error is changing the question to defend a position. A failed chart trade suddenly becomes a 'value investment', or a weak business case is defended by a short price bounce. Changing your method is fine; pretending the original reason never existed is not. Keep a dated record of each decision so you can review it honestly later.

Analysis gives you a reason for a decision. Risk management deals with what happens if you are wrong: how big the position is, what makes you review or exit, and how much loss is acceptable. That also depends on how easily you can trade, your other holdings, any borrowing and what the money is for.

An illustration on real prices. Suppose someone bought 10 ITC shares at the 27 February 2026 close of ₹313.60 and planned to sell if the price fell to ₹310.00 (the quantity and stop level are illustrations). The planned loss was (₹313.60 − ₹310.00) × 10 = ₹36.00 (derived). The next session, 2 March, ITC opened at ₹307.00, below the stop. Assuming the sale filled at that open, the loss was (₹313.60 − ₹307.00) × 10 = ₹66.00 (derived), before charges.

So a stop level is a plan, not a guaranteed price. When the price gaps past it, the order fills at the next available price. With 100 shares, the same gap turns a planned ₹360 loss into ₹660 (derived). That open was also the day's low: ITC closed at ₹314.90 on 2 March, above the stop. Charges and taxes are covered in their own lesson; we ignore them here. We did not research the cause of that gap.

Testing a rule should use only information available at the time. Look-ahead bias uses future information; survivorship bias leaves out companies that disappeared; overfitting tunes a rule too closely to one stretch of history. Include failures, costs and slippage, then check the rule on a period you did not use to build it. No study or past result can promise future performance.

For the business lens, name the filing you used, state the period, and say whether figures are standalone or consolidated. Find the one-offs, such as ITC Hotels' demerger in 2024-25 and the excise change in 2026. Check dividend dates against the company's announcements.

For the price lens, state the date range, choose a timeframe that fits your decision, name the data source, note holidays and special sessions such as 20 October 2026 and Sunday 1 February 2026, and never call a hindsight pattern a signal. Someone else should be able to find the same documents and repeat your arithmetic.

Write down the assumptions that matter most and the evidence that would change your mind. Describe the uncertainty around value, execution and the future. Explain how position size and review rules limit a possible loss, without suggesting any rule removes all risk.

Finally, judge the process separately from the outcome. One profitable result does not prove a poor method, and one loss does not disprove a well-tested one. The two lenses look at different parts of the same share: what the business earns and what the market pays. Keep each claim within what its lens can see, and carry that discipline into the next lessons. The annual report gets a full lesson of its own in lesson 21.